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Zimbabwe, Zambia defaults push up cost of Batoka Gorge project
ZIBABWE
SOVEREIGN debt defaults by Zambia and Zimbabwe have escalated the cost of a planned hydroelectric power plant that the southern African neighbours will co-own.
They engaged US giant, General Electric and Power Construction Corporation of China Ltd in 2019 to build the 2,400MW project on a site along the Zambezi River, which forms part of their border.
The Batoka Gorge project’s initial cost was $4.5bn but has risen by 23% to almost $5bn as a result of the defaults by the two nations, Bloomberg reports.
The project needs credit support, the Zam- bezi River Authority, which is overseeing the construction of the project, said in an emailed response to questions from the news agency. The funding may be raised through develop- ment bank guarantees, government guarantees or partial credit and risk guarantees.
Both countries rely on Lake Kariba, the world’s largest man-made reservoir, to generate power. Planned at a site upstream of the dam, the Batoka project includes a 181-metre high dam and two power stations on either bank of the Zambezi and will generate a cumulative 2,400MW.
Zambia failed to pay its debts in Novem- ber 2020 and now owes slightly above $30mn. About $17bn of the obligations are held by external creditors with whom the government is- now negotiating a restructuring.
Zimbabwe’s national debt is estimated at $13.5bn. It is paying token sums to creditors, including the World Bank and the Paris Club. The government recently appointed African Development Bank (AfDB) president Akin- wumi Adesina to assist in engaging its creditors to find a way to ease the debt burden.
Work on the Batoka project was due to start in 2020 but was delayed by the COVID-19 pan- demic and has yet to begin. The developers are also seeking tax incentives from both Zambia and Zimbabwe.
Zhemu Soda, Zimbabwe’s Minister of Energy and Power Development, told the Chinese news agency Xinhua in January 2021 that an envi- ronmental and social impact assessment for the project had been finalised while engineering feasibility studies, initially conducted in 1993, had been updated. The project, he added, is pro- jected to create 4,000 direct and 6,000 indirect jobs during the construction phase and generate $750mn in annual revenue when complete.™
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